What Are Multiple Listing Services (MLS) in Real Estate?
The MLS: A Cooperative Effort of Local Brokers
A multiple listing service (MLS) is a marketing database set up by a group of cooperating real estate brokers to provide accurate and structured data about properties for sale. It's also a mechanism for listing brokers to offer compensation to buyer brokers who bring buyers for their listed properties.
How It All Started
People have been buying and selling real estate since before America became a nation, and they realized that they needed a way to share information by the time the late 1800s rolled around. Real estate professionals would gather with their local organizations to exchange information and to work out deals for compensation if one brought another a buyer.
These gatherings were the first known "MLS" initiatives. They evolved over the years into print listings and agreements before electronics, and the Internet took over and made the whole process infinitely easier.
MLS Rules and Procedures
Brokers in a market area join an MLS to share listing information about homes for sale with other brokers. It's highly efficient in that every broker wants as many other brokers as possible to know about their listings and bring buyers who have an interest.
Each MLS has its own rules and procedures, but they're generally patterned on regulations published by the National Association of Realtors® when the membership is all realtors. By using rigid data criteria and providing rules for the offer of compensation to other brokers, MLS has become the primary vehicle for the vast majority of real estate transactions over the years.
The rules specify that brokers must indicate in each listing the percentage of the listing commission paid by the seller. It is the amount that they'll share with another broker member who brings a successful buyer.
Members who don't adhere to the structure and content rules can be fined.
The terms "MLS" or "multiple listing service" don't denote any one network, but rather networks all over the country. The terms aren't a brand or trademark.
There isn't an accurate count of all MLS organizations in the country because they're constantly merging and breaking off.
Accuracy of Information
MLS listings databases are considered the most accurate as far as property details on the Internet or elsewhere. New listings must be entered within a specified time period. Fines are generated if a member doesn't enter the full listing data by the deadline. Generally, this is 24 to 48 hours after the listing agreement is signed.
From square footage to directions and location, the MLS association wants to maintain a high level of accuracy in the information that's entered. The quality and number of photos included are often mandated as well, although the exact criteria of this requirement can vary from time to time.
Generally, the local MLS Internet Data Exchange (IDX) feeds, and search systems are considered the most accurate and up to date, better than sites like Zillow and others.
Is the Information Available to the Public?
Technically, the information is available only to the participating brokers. However, brokers are generous about sharing, and they'll do so free of charge to the public. After all, their incomes depend on word of their listings getting out.
Some information is nonetheless kept under lock and key for the sellers' safety, including personal and proprietary information and notes regarding whether the home is vacant.
FSBO sellers—"for sale by owner" properties—can be left out in the cold without automatic access to list their homes as brokers do. Many brokers and online services will list them for a fee, however.
Complaints and Disputes
MLS organizations normally mandate either mediation, arbitration, or both for disputes between members. They also try to be the first destination for consumer complaints, as the next level is the state licensing board.
Each local MLS has an ethics committee to hear complaints from members about other members. The committee hears both sides of disputes and rules on the situation. Many of these problems have to do with commissions.
Issues of Procuring Cause
Procuring cause is a concept that decides which real estate agent is the primary reason for the client's involvement in the transaction. In other words, who got this buyer to the point of contracting to buy this home?
The Internet has aggravated the clarity of this situation. People go to websites and search for home listings, and they might call or email the listing agent with a question about the property. Later, if another agent brings this buyer because she worked with them in finding a home, the listing agent might say that the first contact made them the "procuring cause."
The ethics committee will look at the situation as a whole and in the context of who did what and when they did it. Generally, the buyer's agent will be entitled to the commission if answering a question about the property is all that happened with the listing agent.
Offers of Compensation Are "Unconditional"
Offers are, for the most part, ironclad and unconditional, but there are one or two exceptions. When a listing broker cannot collect a commission due to means beyond her control, she's typically off the hook—but, of course, she's not getting paid, either.
And compensation can be reduced when there is a court order that the commission paid to the brokers must be less than what was originally agreed upon.